Choice-Consistent Resolutions of the Efficiency-Equity Trade-Off
AbstractIn a standard framework of choice theory, we formulate two contrasting principles for social choice under the efficiency-equity trade-off. The equity-first principle states that we should select from equitable allocations if any, but if the equity criterion is not at all effective for selection either because all the available allocations are equitable or because no allocation is equitable, we should select from Pareto efficient allocations. The efficiency-first principle switches the roles of the equity criterion and the efficiency criterion above. We examine the choice-consistency properties, known as Path Independence (Arrow, 1963) and Contraction Consistency (Chernoff, 1954), of the social choice correspondences satisfying the equity-first or the efficiency-first principle. Several possibility and impossibility theorems are obtained, which indicate that possibility of consistent social decisions depends crucially on which principle we take as well as what is the precise notion of equity.
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Bibliographic InfoPaper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2007-09.
Length: 25 p.
Date of creation: Aug 2007
Date of revision:
equity; efficiency; lexicographic composition; choice-consistency; path-independence;
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- Kotaro Suzumura, 1994. "Interpersonal Comparisons of the Extended Sympathy Type and the Possibility of Social Choice," Discussion Paper Series a295, Institute of Economic Research, Hitotsubashi University.
- Yukihiro Nishimura, 2008. "Fair Collective Choice Rules: Their Origin and Relationship," Working Papers 1179, Queen's University, Department of Economics.
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